Vinay Rajani of HDFC Securities said the Nifty is still trading below its 20-day daily moving average, which is currently placed at 10,745.
Last week, the Nifty broke its 5-week winning streak and closed in the red with a loss of 0.99 percent. It ended Friday at 10,714. In the first 4 sessions, the index lost around 264 points while more than 60 percent of intra-week losses got recouped in the last session of the week where it rose over a percent.
The mid and smallcap indices outperformed after a long time with a 1.9 percent and 2.37 percent gain, respectively, on the last trading session of the week.
The Nifty failed to resume its upward move which was seen during Friday’s session. During the last week, it violated its crucial support placed at 10,700, derived from the upward sloping trend line, adjoining the bottoms of March 23 (9,952) and May 23 (10,417).
The Nifty is still trading below its 20-day daily moving average, which is currently placed at 10,745. For bullish confirmation, it has to close above 10,850, which is nothing but the resistance derived from the downward sloping trend line adjoining its all-time high 11,171(January 29) and intermediate top placed at 10,929 (May 15).
As far as support is concerned, 10,550 is the level to watch out for. Any level below 10,550 would aggravate bearishness in the Nifty. A close below 10,550 could push it towards its 200-DMA which is currently placed at 10,442.
Oscillators and Indicators like relative strength index and moving average convergence divergence are still maintaining a bearish stance on the Nifty daily charts.
The midcaps and smallcaps have continued their underperformance. The advance-decline ratio remained negative for the past 13 out of the last 14 sessions.
To conclude, traders should only take aggressive longs once Nifty the closes above 10,850. We might see a relief rally in the smallcap space as most stocks have been hammered down and turned extremely oversold.
Following a strict stop-loss in trading longs is advisable. Any level below 10,550 would trigger fresh momentum selling towards the next support placed at 10,442.
Here is a list of top 3 stock that could return 6-8% in the short term:
Sun Pharma: Buy| LTP: Rs 563 | Target: Rs 600 | Stop-loss Rs 545 | Return 7%
Pharma sector has remained in focus throughout in June and many stocks from the sector have formed trend reversal patterns on the charts.
Sun Pharma remained the leader from the space with price appreciation during the month with rising volumes. For the last couple of weeks, the stock went into a consolidation, which could be a small pause after upward swing seen during the previous month.
The recent consolidation should be utilized to accumulate the stock. Oscillator setup has also turned bullish. We recommend buying Sun Pharma for the upside target of Rs 600 and keep a stop loss placed at Rs 545.
Tata Elxsi Ltd: Buy| LTP: Rs 1,344 | Target: Rs 1,425 | Stop-loss: Rs 1,300 | Return 6%
The appreciation of the dollar against rupee has been in favor of the IT sector. Rupee registered a new all-time low against the Dollar in the recent past, which could augur well for the IT sector in the coming times.
The midcap IT Company, Tata Elxsi broke out from the crucial resistance of Rs 1,200 on the long-term monthly chart during April 2018.
In the recent correction of the market, the stock remained resilient and continued to extend gains towards fresh new highs.
The stock price has been trading above all important moving averages. The oscillator setup has also been bullish for the counter. We recommend buying Tata Elxsi for the upside target of Rs 1,425, and a stop loss placed below Rs 1,300.
Shriram Transport Finance Ltd: Sell| LTP: Rs 1,286 | Target: Rs 1,180 | Stop-loss: Rs 1,365 | Return 8%
For the last couple of weeks, NBFC sector has remained under pressure and many of stocks from the space have turned weak on the charts.
Shriram Transport Finance has recently breached the crucial support of its 200-DMA, currently placed at Rs 1,365. The stock has been forming lower tops and lower bottoms on the daily charts. Short term moving averages have crossed long-term moving averages on the downside, indicating weakness in the short term trend.
We recommend selling Shriram Transport Finance for the downside target of Rs 1,180 and keep a stop loss placed above Rs 1,365.
Disclaimer:-The views and investment tips expressed by investment experts are their own. Ripples Advisory advises users to check with certified experts before taking any investment decisions.
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